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Digital Audio Insider is David Harrell's blog about the economics of music and other digital content. I write from
the perspective of a musican who has self-released four albums with the indie rock band the Layaways.

My
personal website has links to my LinkedIn and Google+ pages and you can send e-mail to david [at] thelayaways [dot] com.

Nickeled and Dimed
Money managers sometimes use the mantra "maximizing shareholder value" when talking about the desired traits of stocks they want to buy. That is, they want to own the stocks of companies that have management teams that are committed to running their businesses in such a way as to maximizing the return to the investors who buy the stock.

Makes perfect sense from an investment standpoint. But when you apply that maxim to a publicly-traded record company, it sure doesn't seem to result in artist-friendly business practices. Does "maximizing shareholder value" also mean "minimizing artist income" for the musicians on the label?

Diana Ross's new jazz album isn't exactly new -- she recorded it about 35 years ago.

But there's something decidedly contemporary about the CD, which goes on sale June 20 (it's already available at Starbucks). It's part of a new wave of old music, as a sales-starved industry scours its libraries for old or unreleased material it can spin into easy profits.

In 1972, Ms. Ross was riding high on the release of her Billie Holiday biopic "Lady Sings the Blues," for which she later received an Oscar nomination. In conjunction with a movie soundtrack composed of pop-influenced renditions of Billie Holiday tracks, Ms. Ross also separately recorded purer jazz versions of the same material, along with some standards. But according to Universal Music Group, which now owns Motown, the jazzier versions, arranged by Gil Askey, were rejected because the label wanted her to work on more commercial releases.

Now the economics are different. It usually costs less to hire a "vault asset specialist" to find previously recorded tracks from an existing performer than it does to record new songs or market a new artist -- especially when established musicians can be paid royalties on old music at the lower rate they typically would have been paid when it was recorded. (Universal declined to comment on Ms. Ross's royalties, but her business manager says her deals have been renegotiated several times since 1972.)

If I were a shareholder of Vivendi, which owns Universal Music, I suppose I'd agree that paying Diana Ross the smallest possible royalty was good for the bottom line. And Ms. Ross probably isn't anyone's first choice as a poster child for starving musicians who've been deprived of their rightful royalties.

Yet there seems to be a basic lack of fairness here, if Universal is indeed paying 1972 rates for something released in 2006. Granted, Universal is dropping some bucks on the promotion of this album, mixing it, mastering it, etc. But these recordings have basically been gathering dust for 30+ years. Seems like any income from them in 2006 would be considered pure gravy from an accounting standpoint, not a reason to pinch pennies on artist royalties.